| Being an individual contractor has its own rewards, but | | | | company pays you as its contractor over $600 a |
| one should not forget the additional work that is | | | | year, you will be sent a 1099 form. You will not have |
| involved in self employment. You will be preparing your | | | | your taxes withheld from your wages, instead you will |
| own invoices and payment processing forms. As an | | | | have to file your income and pay a self-employment |
| individual contractor, you will have to file taxes with the | | | | tax. If you are a freelancer on the other hand, you |
| Internal Revenue Service much differently than as an | | | | must file a 1040 Schedule C form when you are |
| individual. | | | | making more than $400 a year. Your tax rate can |
| An independent contractor differs from a regular | | | | vary greatly depending on how much you earn. |
| employee. They do not participate in the same | | | | Filing a Schedule C form consists of the following: |
| activities, programs, or systems which are generally | | | | 1) Find out if you are a sole proprietor. |
| run by the company. Independent contractors may or | | | | 2) Acquire a Schedule C from an Internal Revenue |
| may not work for a company but if they do, they are | | | | Service office. |
| not subject to the same rules or restrictions as | | | | 3) Enter your name, Social Security Number, and |
| ordinary employees. | | | | address. |
| If you are just starting a job and want to be an | | | | 4) Describe your business and enter the business |
| independent contractor for a company, the first thing | | | | name. Enter your six-digit business code. |
| you should do is to make sure that the client or the | | | | 5) Check the box explaining your accounting method. |
| company will be listing you on the tax forms as an | | | | 6) Check the box "yes" or "no" as to whether you |
| independent employee. You can also check with the | | | | "materially participated" in the business |
| IRS to see if you will be classified as an independent | | | | 7) Check the box if you started or purchased the |
| contractor. You will be taking the "20 Questions Test" | | | | business during the tax year |
| where a number of factors will be checked. This will | | | | Tax codes are always changing and filing procedures |
| help determine how much control the client or | | | | vary greatly from state to state. Your main job is to |
| company has over you and the work that you do. | | | | investigate or ask the IRS for more information. For |
| As an independent contractor, you are still considered | | | | each filing year, always remember to check for new |
| a business. You will likely fall under the category of | | | | tax rules. Tax codes, rates, procedures, and even |
| sole proprietorship. If however, you work for a | | | | forms are always changing. |
| company as an independent employee and the | | | | |